federal loans

When I read this story, I suddenly became grateful. You see, I used my book advance from Sex & God at Yale to pay off my student loans. Turns out I was very fortunate–more so than some of my fellow low-income graduates, apparently.

Yale University may have an endowment in excess of $20 billion, but that hasn’t stopped it from suing some of its poorest graduates for unpaid student loans.

Bloomberg News reports:

Needy U.S. borrowers are defaulting on almost $1 billion in federal student loans earmarked for the poor, leaving schools such as Yale University and the University of Pennsylvania with little choice except to sue their graduates.

The record defaults on federal Perkins loans may jeopardize the prospects of current students since they are part of a revolving fund that colleges give to students who show extraordinary financial hardship.

Yale University is among colleges suing former students for defaulted Perkins loans, which are earmarked for students with extraordinary financial hardship, court records show.

Yale, Penn and George Washington University have all sued former students over nonpayment, court records show. While no one tracks the number of lawsuits, students defaulted on $964 million in Perkins loans in the year ended June 2011, 20 percent more than five years earlier, government data show. Unlike most student loans — distributed and collected by the federal government — Perkins loans are administered by colleges, which use repayment money to lend to other poor students.

“If you borrow to go to school, it may not be just the government that ends up coming after you if you can’t pay,” said Deanne Loonin, an attorney with the National Consumer Law Center, a nonprofit advocacy group in Boston. “We offer credit very easily.” If the student doesn’t benefit financially from the education, “the government or the school comes after them very aggressively.”

Debts must be repaid. That’s certain. And Yale has a legal right to sue for repayment. But I’m surprised to read about a proudly progressive, wealthy university like Yale going after low-income graduates so aggressively. Aren’t you?

A government office released a report questioning a federal mandate which said the Department of Education should create a loan comparison website for college students.

In the report released by the Government Accountability Office, investigators scrutinized the need for the Department of Education to create a tool on its website that would assist students in comparing interest rates and information regarding federal and private loans.

According to the report, the creation of this national clearinghouse for student loans has been mandated by the Higher Education Opportunity Act.

Results from the report found creating a tool on the Education Department’s website would be feasible, but the need for it remained questionable.

There are already several web-based loan comparison tools available to students, the report said.

Wisconsin Center for the Advancement of Postsecondary Education Director Noel Radomski said many universities already have websites detailing loan opportunities.

In addition, he said he believes the mandate is built on speculation of a potential problem facing students.

Radomski said he has not seen evidence students are having problems finding loans. Rather, he said, funding for developing the program might be better used toward altering real problems students face today, such as high tuition rates.

The report also explored the dilemma of how to provide accurate information to different students nationally.